Registering with the SEC should not be a requirement of hedge funds, at least not in the mind of Federal Reserve Chairman Alan Greenspan.

Calling hedge funds helpful to the "internal flexibility of our financial system" yesterday, Greenspan intimated that as long as lower- and middle-income families do not invest in hedge funds, the SEC should not be as stringent with these investment vehicles as it is with lower-shelf investments. The SEC has proposed that hedge funds be required to register with the commission just like mutual funds.

"I would grant you that registering advisors in and of itself is not a problem. The question is, what is the purpose of that unless you’re going to go further?" Greenspan said.

Speaking to the Senate Banking Committee, Greenspan defined hedge funds "as financial institutions in which investors are only of high-income levels."

"The value of these institutions is to create a very significant amount of liquidity in our system," Greenspan added. Tighter legislation would squelch some of that liquidity. Greenspan said.

But citing hedge fund companies’ roles in the ongoing mutual fund scandal, the SEC responded respectively but disagreeably to Greenspan’s non-urgent views toward registration.

"The SEC Staff does not believe that their recommendation would impede the manner in which hedge funds operate, nor reduce the liquidity hedge funds provide to the marketplace," Laura Cox, and adviser to SEC Chairman William Donaldson, told Reuters.

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The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

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